Advisors talk what the fiscal cliff could mean for you

OAKWOOD, Ohio (WDTN) - Fears of another financial recession continue to grow as leaders in Washington failed to agree on a plan to avert the fiscal cliff Tuesday evening. 

The Fiscal Cliff is a series of tax increases and spending cuts amounting to $600-billion that will go into effect at the beginning of 2013.  Financial Advisors fear the U.S. could slip back into a recession if these increases and cuts are fully implemented.  Democrats and Republicans must come to an agreement by the end of this year.

On Monday, Republicans proposed a deal in the fiscal cliff negotiations to President Obama.  The GOP plan includes $800-billion in new taxes by closing loopholes and deductions.  Approximately $600-billion would be saved in part by making Americans wait till they're 67 to get Medicare.  Obama, however, insists tax cuts on the wealthiest Americans must be allowed to expire.

Gridlock in Washington is creating fears of a recession where job growth could slow, unemployment rise again, incomes could remain flat and consumer confidence, likely fall.

Financial advisors said now is not a time to panic, but to be prepared

"People should probably just stick to their plan," said Doug Kinsey, who is a Partner with Artifex Financial in Oakwood.  "If they're not sure they need to go see an advisor."

Kinsey believes the tax rates set to expire could have a short term impact on the economy, meaning six months to two years.  Kinsey advises to factor in how sensitive your assets are to short term situations.

"If your assets are appropriately positioned then you shouldn't have any concerns," said Kinsey.  "If you are too heavily weighed in stocks this might be a good time to reduce your allocation a little bit to sensitive sections of the stock market."

Kinsey  added to consider your tax bracket.  Those in a higher standing may decide to sell some holdings in gains this year.  Also, Kinsey warns to factor in time when it comes to your 401K.

"If you have seven plus years to retire or reach a goal you probably don't need to take any action at this point," said Kinsey.  "If you are just a year or two out of retirement then maybe you should take action right now."

The Fiscal Cliff is due in part to Congress being forced to raise the national debt ceiling.  In 2011, the U.S. was on the verge of a major economic crisis.  Democrats and Republicans finally came to an agreement, but that included the spending cuts that come into effect in 2013.